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Iran Where Art Thou? Boeing Needs You

Since sanctions against Iran have been lifted, mega-orders from the country were expected in the aviation industry. So far, only Airbus was able to secure a deal.

Boeing could not start negotiations with Iran yet, since it did not have permission to do so at that time.

Soon after the removal of sanctions as part of the July nuclear deal between Tehran and world powers, Iran Air and Airbus signed a $27 billion deal for the purchase of 118 jetliners from the French planemaker.

Since it received permission to negotiate in February, Boeing has started negotiations in April and offered three models to Iran. No deal has been made yet, but Iran is widely expected to order Boeing aircraft in the near future.

Iran stated that it would buy 80-90 aircraft from both manufacturers. Currently, US congressmen are trying to prevent Boeing from making a deal with Iran.

In this article written in Seeking Alpha–a crowdsourced content service for financial markets–the author surveys why Boeing actually is in dire need of this deal.

Boeing 737

Boeing currently anticipates lower 737 deliveries for 2016 due to the transition to the MAX. It is, however, more likely that Boeing has been coping with a gap in 737NG production for 2016. If a deal is reached with Iran and enough parts are on order, Boeing could try to fill the gap with an Iran order. Assuming for simplicity that an order for a total of 90 units will be placed and will have a similar composition (excluding the A380) as in the deal with Airbus, Boeing could sell up to 34 737s to Iran, including 16 units for the current Boeing 737NG and 18 orders for the Boeing 737MAX.

Boeing 777

In the deal with Airbus, the heavily discounted A330ceo accounted for 25% of the total orders. For Boeing, the 777 is the highest discounted model. Boeing is aggressively discounting the Boeing 777 to close the production gap it is currently facing. Using the same percentage, Boeing could secure up to 23 orders for the Boeing 777 and 14 Boeing 777X airframes.

Boeing 787

As Boeing is ramping up deliveries for the Boeing 787, some bigger orders for the Boeing 787 are more than welcome as well. Boeing could sell up to 19 units to Iran.

Conclusion

So, one reason for Boeing to strike a deal with Iran is to solve the challenges it is facing on some of its programs.

An order for the Boeing 777 could be sizable and would significantly aid Boeing in closing the gap.

It is also likely that Boeing will be more than eager to sell the Boeing 777 to Iran. If it is not too late already, Boeing could sell some 2017 slots to Iran Air as well.

Another reason for Boeing to strike a deal with Iran is to have an almost equal weight competitive position on the Iranian market that is likely to be needing over 500 airplanes in the coming years. Not taking advantage of this would throw these orders in Airbus’s lap.

Whether the US Congress likes it or not, a deal with Iran could improve Boeing’s short-term earnings while also securing a role on the Iranian market in the long run.